DCIT 10(2)(2), MUMBAI vs. M. SURESH EXPORTS P.LTD, MUMBAI

ORDER PER G.S.PANNU,A.M:

The captioned appeal by the Revenue is directed against the order of CIT(A)-17, Mumbai dated 18/12/2015, pertaining to the Assessment Year 2003-04, which in turn has arisen from the order passed by the DCIT,8(2) Mumbai dated 26/03/2013 under section 271(1)(c) of the Income Tax Act, 1961 (in short ‘the Act’).

raised by the Revenue read as under:-

1. "On the facts and in the" circumstances of the case and in law, the Ld. CIT(A) is not justified in cancelling the penalty u/s.271 (l)(c) of the Act without appreciating that the assessee had claimed excess deduction u/s.1OA of the Act by inflating exempted profits which was based on the specific information received from the Customs Department and thereby, concealed the particulars of its income.

2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) is not justified in cancelling the penalty u/s.271(l)(c) of the Act without any consideration of its intrinsic merits and solely owing to the fact that the corresponding prior order of reassessment itself stands cancelled in entirety by the order of Hon'ble ITAT, Mumbai, without appreciating that the provisions of section 292BB of the Income-tax Act, 1961 would be applicable to all assessment proceedings pending as on 01.04.2008."

3. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty u/s.271(1)(c) of the Act without appreciating that the assessee had failed to rebut the presumption in Explanation-1 of section 271(l)(c)of the Act."

4. The appellant prays that the order of the CIT(A) on the above ground be set aside and that of the A.O. be restored.”

3. In brief, the relevant facts are that assessee is a closely-held company engaged in the manufacture and export of studded gold, jewellery and its manufacturing facility is situated at SEEPZ, Andheri(East) Mumbai. The assessee filed its return of income on 27/11/2003, declaring a total income of Rs.68,05,086/-. The assessment was completed under section 143(3) of the Act and the total income was assessed at Rs.68,81,280/- . The assessee was allowed deduction of Rs.6,05,46,762/- under section 10A of the Act. Subsequently, the assessment was re-opened and completed under section. 143(3) r.w.s. 147 of the Act determining total income at Rs.1,73,58,930/-. In the reassessment, deduction under section 10A of the Act was reduced to the extent of Rs.1,18,12,796/- being the difference between export proceeds of Rs.7,02,10,134/- and fair value of goods under export of Rs.5,83,97,338/- determined by the Customs authorities, is considered as a profit, which is not derived from export of articles or things and, therefore, not eligible for deduction under section 10A of the Act. Penalty proceedings under section under section 271(1)(c) of the Act has been initiated for concealment of income and for furnishing inaccurate particulars and a penalty of Rs.38,50,536/- was imposed on the assessee. The assessee carried the matter in appeal before CIT(A) who cancelled the penalty imposed under section 271(1)(c) of the Act. Being aggrieved by the order of CIT(A), Revenue is in appeal before the Tribunal.

3. At the time of hearing, the learned representative for the assessee pointed out that the assessee’s appeal in quantum assessment proceedings has been annulled by the Tribunal vide its order in dated 23/09/2015, copy of which is placed on record. In view of the above, the Ld. Representative for the assessee pleaded that the additions on the basis of which the penalty has been levied under section 271(1)(c) do not survive.